but that 3 billion never actually existed other than as numbers for keeping score, and the bricks and mortar still remain and can be put to use again. Physical capital is not destroyed but financial capital is.

but that 3 billion never actually existed other than as numbers for keeping score, and the bricks and mortar still remain and can be put to use again. Physical capital is not destroyed but financial capital is.

Literally? Agree. But tell that to the millions of people that lost jobs and the businesses that closed when someone at Lehman "clicked a mouse". Reassure the Eurozone using that same logic as the banking sector falls in on itself. No biggie.

Think of all of the homes sitting vacant and then think of all of th epeople that are homeless.

Madness.

But we must keep them hungry or they won't want to work.

One of my favorites:

"The coalition believes that the rich must be made richer to encourage them to work and the poor must be made poorer to encourage them to work. In the meantime, the economy stagnates, the prospects of growth retreat before our very eyes and the pain of fiscal consolidation intensifies." (Lord Eatwell - Labour)

Trixie, finance capital is dangerous economically, but it is war that destroys physical capital. The good news is that nominal mistakes are quite easily correctable through principles such as MMT points out. There was no actual need for the real economy to contract if policy makers had known what to do and done it, i.e., followed MMT policy. Either they were ignorant or disingenuous.

It's true that idle real resources may deteriorate more quickly, but that it is not a given. What is given is that in default, ownership changes hands. If the new owner doesn't value the property, then the real value declines, too. Some banks would rather bulldoze the structure and take loss the tax write off since it is more profitable to them than maintaining the property. It's generally the land that is valuable.

The quote is just a re-statement of Keynes’s paradox of thrift: i.e. that saving money is deflationary. The quote is wrong to suggest that such saving “impoverishes the entire nation”. At least if an MMTer was running “the nation” they’d know what to do: if there is an increased desire by the private sector for net financial assets, then the government / central bank machine needs to supply those assets via a deficit.

I myself went looking for the source of this quote and I have seen it questionably attributed to Lester B. Pearson (indeed a former PM of Canada) and also to a murky character called B. Lester, and also, of course, to Jon Stewart. Who knows where the original quote is from.http://www.tumblr.com/tagged/stanley-donwood?before=1321639084